You operate a wind farm that you built for $16 million, three years ago. Originally, the entire cost of the building was to be depreciated straight-line to zero over 10 years. Legislation to support green energy has been enacted which will immediately allow wind farms to be depreciated straight-line to zero over four years. In other words, your depreciation expense will immediately change from $1.6 million/year to $4 million/year, going forward from now. Assume your firm's tax rate is 35% and cost of capital is 12%. Compute the present value for the depreciation law change for years 4-10.

Answer rating: 100% (QA)

To compute the present value of the depreciation law change for years 410 we need to calculate the present value of the additional depreciation tax sh... View the full answer